If You Haven't Been Car Shopping in a While, Brace Yourself

In the rapidly evolving automotive industry, consumers who haven't been car shopping in a while may be surprised by the significant changes that have taken place. The shift towards electric vehicles (EVs), advancements in autonomous driving, and the emergence of new business models are transforming the automotive landscape. Let's delve into these trends and their implications for consumers and investors alike.

Electric Vehicle Market Growth
The most striking change in the automotive industry is the exponential growth of electric vehicles. In 2023, nearly one in five cars sold was electric, up from 14% in 2022 and just 2% in 2018 (IEA). This shift is driven by sustainability concerns, government incentives, and technological advancements. China, Europe, and the United States account for 95% of global EV sales, with China leading the market with 60% of new electric car registrations in 2023 (IEA). However, sales remain limited elsewhere, even in developed markets like Japan and India.



Autonomous Driving: Promise and Challenges
Autonomous driving technology has seen significant advancements, with robo-taxis and robo-shuttles expected to see sizable scale-up in the next one to two years. However, consumer attitudes towards self-driving cars remain mixed. While some players continue to deploy the technology, others have exited the market due to setbacks. The auto insurance landscape is also adjusting to the changing realities of shared mobility and autonomous vehicles.

New Business Models: Expanding Revenue Pools
New business models, such as vehicle subscriptions and shared mobility services, have significantly impacted the automotive industry and consumer behavior. According to McKinsey's "2030 automotive revolution" study, these models could expand the automotive revenue pool by about 30 percent, adding up to $1.5 trillion by 2030. Deloitte's 2024 Global Automotive Consumer Study found that a significant number of younger consumers are interested in giving up vehicle ownership in favor of subscriptions, with 47% of 18- to 34-year-old respondents expressing interest. This shift is driven by uncertain economic conditions and concerns about vehicle availability, total ownership cost, and monthly fees.

Investment Opportunities in the Automotive Industry
The automotive industry's transformation presents both challenges and opportunities for investors. Traditional automakers and suppliers must adapt their business models to remain competitive in this evolving landscape. Companies that focus on new businesses, such as shared mobility and connectivity services, are more likely to outperform the market. By committing to new businesses, incumbents enter a race with the many start-ups attacking the mobility space. While the competition is fierce, incumbents do have some advantages, including years of experience, cash reserves, and an existing customer base.

In conclusion, the automotive industry is at an inflection point, with major new market trends looming on the horizon. The shift towards electric vehicles, advancements in autonomous driving, and the emergence of new business models are transforming the automotive landscape. Consumers who haven't been car shopping in a while may be surprised by these changes, but investors who stay informed and adapt their strategies accordingly can capitalize on the opportunities that lie ahead.